What is the Future for Green Levies?

The recent increases in gas and electricity prices by some of the large energy companies has focused the spotlight on ways of reducing bills for householders. One announcement made in parliament by David Cameron was his intention to “roll back” the green levies imposed on the energy companies that help to fund renewable and energy efficiency schemes. However, since he made this statement, there has been further clarification from Ed Davey, the Energy Secretary, on what a “roll back” might actually mean. We may not know the full details until the autumn statement on 4th December and there is apparently some disagreement within the coalition as to what levies should be removed from energy bills.

How Will Green Levies be Changed?

Ed Davey has stated that he is happy to see schemes such as the Energy Company Obligation that provides free boiler upgrades and insulation to households on low incomes and the Warm Homes Discount that provides up to £140 per year to help low income households pay for energy bills, moved out of energy bills and into general taxation i.e. funded by central government. However, he has stated that he is not happy for the amount of funds available via these schemes to be lowered. He is intent on making sure households continue to get energy saving improvements that will ultimately provide longer term savings and improve the energy efficiency of the UK housing stock.

It is estimated that moving the Energy Company Obligation and Warm Homes Discount into general taxation might save an average household around £58 per year however, if no other green levies were changed, that would still leave households paying approximately £54 a year towards these schemes via their energy bills. The question that has to be answered is how would the estimated £2.3bn these two schemes cost be funded from existing budgets? Funds are either going to have to come from increases in taxation or cuts in other government spending. Either of these will inevitably impact on householders in some way so the overall savings made by householders from these measures are likely to be very small.

One measure that has been suggested by the big six energy companies is to extend the period over which targets must be met for the Energy Company Obligation. At present the scheme is designed to finish in March 2015 but the energy companies have argued that by extending this by 18 months, the cost could be spread over a longer period of time. It is believed that Ed Davey is opposed to this suggestion.

Reducing Green Levies Will Not Make a Significant Difference to Energy Bills.

So whilst many householders are hoping that George Osborne does announce changes to the green levies in the autumn statement, it is unlikely to have a significant impact on energy bills. Householders would be wise to take advantage of schemes such as The Energy Company Obligation and The Green Deal. Both will help reduce the cost of energy bills significantly and could save the average household hundreds of pounds a year.

Householders are still advised to switch supplier and can do this via sites such as http://www.saveonhouseholdbills.com/. Heating oil users can also save money on their fuel bills by monitoring prices and knowing when the best time to buy is. See our tips for finding cheaper heating oil.

More information on Green Levies and Energy Saving Grants

For more information about The Energy Company Obligation visit the government site here.